Married Spouses and Unjust Enrichment: Martin v Sansome

Martin v Sansome, 2014 ONCA 14, 118 OR (3d) 522

This case addresses the issue of unjust enrichment in the context of married spouses and its remedial framework.

Background

The parties began living together in 1988 and had a daughter in 1989.  They were married in 1996, but separated in 2007.  The parties agreed to purchase the family farm that the husband grew up on.  The wife’s name, however, was struck from the agreement the day prior to closing.  The wife was then required to sign a domestic contract that waived all rights to the farm.  The wife was sent to other counsel for independent legal advice, but counsel was effectively blind and did not read the domestic contract or review it with the wife.  The wife signed the domestic contract even though she knew that it was probably not to her benefit.

Analysis

Setting Aside the Domestic Contract

The Ontario Court of Appeal confirmed the decision of the lower court with respect to setting aside the domestic contract in accordance with section 56(4)(b) of the Family Law Act.  Although the respondent “appreciated that the domestic contract was not good for her”, it did not “mean that she understood either the nature or consequences of the domestic contract” (para 45).

Unjust Enrichment and Constructive Trust

In Rawluk v Rawluk, [1990] 1 SCR 70, the Supreme Court of Canada held that the statutory scheme for the equalization of spouses’ property on marriage breakdown does not completely supersede the remedial constructive trust.

The Supreme Court of Canada reiterated the existing principles of unjust enrichment in Kerr v Baranow, 2011 SCC 10.  Further, the Court reaffirmed that where unjust enrichment has been established, the first remedy to consider is always a monetary award (para 48).  A court will only “impress a proprietary remedy” if, and only if, the plaintiff satisfies the Court that a monetary award would be insufficient in the circumstances and that there “is a sufficiently substantial and direct link between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property” (para 48).  The Court established in Kerr that the following framework ought to be followed in cases involving such issues:

1. Have the elements of unjust enrichment – enrichment and a corresponding deprivation in the absence of a juristic reason – been made out?
2. If so, will monetary damages suffice to address the unjust enrichment, keeping in mind bars to recovery and special ties to the property that cannot be remedied by money?
3. If the answer to question 2 is yes, should the monetary damages be quantified on a fee-for service basis or a joint family venture basis?; and,
4. If, and only if monetary damages are insufficient, is there a sufficient nexus to a property that warrants impressing it with a constructive trust interest? (Martin v Sansome, 2014 ONCA 14, 118 OR (3d) 522, para 52)

The Ontario Court of Appeal held that the elements of unjust enrichment had been made out.  The Court of Appeal, however, held that the trial judge failed to consider if monetary damages suffice to address the unjust enrichment and, in doing so, made an error of law.  Further, the Court of Appeal held that Kerr makes it clear “that the onus is on the plaintiff to establish that monetary damages would be insufficient” (para 59).  The respondent in this case did not lead any evidence or make any submissions in this regard, and, further, the Court was not satisfied that recoverability was an issue.

The Court of Appeal further held that this was not a case where a monetary award would be insufficient.  Thus, the Court of Appeal turned to address the issue of how to calculate the monetary award.  The Court held that if there is a finding of unjust enrichment and monetary damages suffice, the “aggrieved party’s entitlement under the equalization provisions of the Family Law Act should first be calculated”.  Furthermore, where equalization would be unconscionable, section 5(6) of the Family Law Act provides for the unequal division of net family property.

In this case, the equalization provisions of the Family Law Act adequately addressed the unjust enrichment arising out of the marriage.  The Court, however, recognized that there may be rare cases where monetary damages for unjust enrichment arising out of marriage cannot be addressed by these provisions, but chose to leave this issue to another day.